By Mike Cronin
Minimum wage laws, which are meant to reduce poverty, actually cause dysfunction and increase poverty and criminality. The political architects of such laws know this, or remain purposely blind to it, so that they can make promises, get votes, and gain or remain in office.
So how does a mandated minimum wage increase poverty? While the person who has a minimum-wage job may or may not be defined as poor, it is the person who can’t get a job that suffers the worst effects of minimum wage laws. Since there is no corresponding minimum revenue laws, minimum wage laws dis-incentivize job creation. Business owners, especially small business owners, have to make a certain amount of money in order to break even, that is, just to pay for their business loans, employees, suppliers, landlords, taxes, and whatnot. Yet there is no law forcing anyone to buy the offerings of a given business. If a business doesn’t earn enough revenue, they can’t afford to pay even the minimum wage to their employees, so they either have to hire less people than they otherwise might have, they have let people go, or they have to go out of business. In any of those cases, jobs were either lost or not created, which makes it harder for unskilled people to find work, which leads to increased unemployment and poverty.
For example: If you are old enough, you might remember the days when movie theaters had ushers. It’s an extremely low-skill job; you could teach it to a high-school kid in an hour or two – and pay him or her correspondingly low wages. There was a match between worker skill level, worker responsibility level, and worker pay. These days, no one is going to pay a kid $8.00 or $10.00 an hour just to usher, so the usher’s duties got blended into other jobs (assistant manager?) and the job all but disappeared.
Similar entry-level jobs are hard to find anywhere, which makes it harder for high school kids to find work and establish an employment track record. Instead, such kids either remain with their parents longer, causing the parents to have to support a child longer than they had planned, reducing the parents’ own wealth; or the kid lives on the streets, greatly increasing the likelihood he or she will resort to criminal conduct to survive.
There is a another way some employers skirt the minimum wage laws and pay cheap rates for low-skill labor: They pay illegal immigrants illegally low wages in cash under the table. This incentivizes illegal immigration, which, in effect, imports more poverty. The illegal immigration “infrastructure” is an underworld, and it attracts other crime: tax evasion, prostitution and other forms of human trafficking, narcotics, gunrunning, gambling (esp. on illegal dog and cock fights), ID forgery, and so on.
To be sure, the minimum wage laws aren’t solely responsible for poverty, illegal immigration, and vice. Rather, they are a large and obvious contributor to those maladies, even as they fail to produce the promised positive effect. But they sure sound good.